The Clash of Central Banking and Crypto Culture

The Clash of Central Banking and Crypto Culture

the third floor of the cylindrical tower housing the Bank for International Settlements, I was taken aback by what I saw: white walls.

This might not seem like a big deal, but let me explain. The BIS is the central bank for central banks and is based in Switzerland, a global financial hub. On my previous visits, the decor was traditionally reassuring with dark wood paneling, formal chairs, and neutral colors. The bank projected a sense of stability, like most central banks, with a timeless and classic appearance.

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However, the new white walls are an indication of a curious cultural experiment underway. A year ago, the BIS launched several “innovation hubs” focused on exploring crypto and cyber initiatives. One of the most significant projects it is currently assisting in is the creation of several central bank digital currencies (CBDCs) globally. At the end of 2022, around 114 countries were exploring CBDCs, 20 were piloting them, and 11 had launched them, according to the Atlantic Council.

To emulate Silicon Valley or Sweden’s fintech hub, one corner of the BIS has replaced its dark wood paneling with glass, soft chairs, and whiteboards. It’s not the laid-back Bahamas penthouse that served as FTX’s headquarters or the graffiti-covered building in Brooklyn that houses ethereum currency’s key player, ConsenSys, but it is a step towards breaking central banking’s stuffy image.

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But is this a wise decision? Crypto enthusiasts say no. Most people invested in bitcoin or ethereum because they want to overturn existing financial hierarchies, and they believe central bankers are too old-fashioned to comprehend the innovative potential of digital assets.

Moreover, they are afraid that the reason why central banks such as the BIS are experimenting with CBDCs is to crush private-sector tokens that could challenge traditional or “fiat” currency. They fear that central banks will not outright ban those challengers but instead steal their cyber clothes.

The conspiracy theorists may be partially correct. At a recent meeting of central bankers and regulators, there was a clear belief, or hope, that CBDCs could displace most private tokens in the future. Given that crypto assets like bitcoin have seen significant value drops, and scandals like the one at FTX have resulted in regulatory crackdowns. The head of the BIS, Agustín Carstens, even said that recent events mean the “battle has been won” between crypto and fiat – by central banks.

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However, not everyone inside central bank towers thinks it’s necessary or prudent to experiment with CBDCs. The innovation could put the banks in charge of vast quantities of citizens’ data and undermine the role of commercial lenders. It may not even result in quicker payments for citizens. A recent House of Lords report was so unimpressed with CBDCs that it asked if they were “a solution in search of a problem.” Meanwhile, Tony Yates, a former adviser to the Bank of England, argues that “the huge undertaking” is simply “not worth” the costs and risks. Jay Powell, chair of the Federal Reserve, admitted that he is “legitimately undecided on whether the benefits outweigh the costs or vice versa.”

It’s no wonder there is a divide. While these two worlds overlap, tribalism remains a powerful force. Central bankers are trained to move carefully, prioritize stability, and operate within hierarchical power structures. In contrast, tech entrepreneurs driving the digital asset revolution value networks, crowd power, not hierarchies, and want to disrupt the establishment by taking bold steps and risks. These two cultures are completely different, and they tend to talk past each other. One central banker who dealt with Facebook when it tried to launch its Libra digital asset project in 2019 said, “